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Lessons on "Pay-for-Delay" Agreements: the EU Court of Justice Ruling in the GSK Generics Paroxetine Case

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In a major judgment handed down on 30 January 2020 in Generics (UK) and Others, the EU Court of Justice (the Court) – the EU’s highest court – clarified for the first time the analytical framework for assessing when patent settlement agreements that restrict a generic pharmaceutical company’s ability to enter the market infringe the EU antitrust rules. While the ruling addresses specific questions raised by a UK court in the context of an individual antitrust case relating to the anti-depressant drug paroxetine, manufactured by GlaxoSmithKline (GSK), the ruling also carries wider significance. The judgment provides detailed guidance that will assist pharmaceutical companies in self-assessing whether any patent settlement agreements they contemplate are in line with EU antitrust rules. It will also serve as an important reference point for other on-going and future cases, including the upcoming judgments in Lundbeck and Servier.
 
Overall, the ruling confirms that patent settlement agreements that delay a generic company’s market entry in return for a payment, or other value transfer from the originator to the generic company, are exposed to high EU antitrust risks under both Article 101 of the Treaty on the Functioning of the European Union (TFEU), which prohibits anticompetitive agreements, and Article 102 TFEU, which prohibits abusive unilateral conduct by dominant firms. While the judgment acknowledges that such agreements are not, by definition, anticompetitive, it makes clear that the scope for a successful defense is very limited where the settlement involves a value transfer from the originator to the generic company that is sufficiently large to act as an incentive to the generic company to refrain from entering the market, and which does not have a proven legitimate objective. 
 
 Key takeaways on the judgment are discussed further in the full article, click here.

 

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